After a difficult 2022, both stocks and bonds got off to a strong start in the new year. Softer-than-expected data on inflation in January led to falling long-term interest rates and optimism that the Federal Reserve rate-hiking cycle was coming to an end. This led the S&P 500 to post its second strongest return for the month of January since the 1980’s. This favorable environment gave way to hotter inflationary readings in February and turmoil in the banking industry in early March that culminated in the failure of three banks, including two of the 50 largest banks in the country (Silicon Valley Bank and Signature Bank). Despite the volatility that accompanied this banking turmoil, U.S. stocks, as measured by the S&P 500, finished the first quarter up 7% (excluding dividends). One caveat is that this performance was not broad based; the top 20 stocks in the index accounted for almost all the market value increase in the quarter. Indeed, the Russell 2000 index, which has much higher exposure to smaller companies and the regional banking industry, was only up 2.3%. U.S. bonds, as measured by the Bloomberg Barclays Aggregate Bond Index, were up 3% for the quarter, supported by falling interest rates. Gold, as it often does during times of turmoil, turned in a strong performance, rising 8% during the quarter.